exhibit103.htm


    
      

    

    Exhibit 10.3

    


      [CarMax
Master Form Directors Stock Option Grant}

      


      [Date]

      


      


      


      «Title»
«FirstName» «LastName»

      «Company»

      «Address1»

      «Address2»

      «City»,
«State»  «PostalCode»

      


      Dear
«FirstName»:

      


      You have
been granted non-statutory stock options (the “Options”) to purchase shares of
the common stock of CarMax, Inc. (the “Company”) as set forth
herein.  This grant is made pursuant to the 2002 Non-Employee
Directors Stock Incentive Plan, as amended and restated (the
“Plan”).  The Options are not qualified for
Incentive Stock Option treatment.

      


      The
Options are subject to the provisions of the Plan.  The terms of the
Plan are incorporated into this letter and in the case of any conflict between
the Plan and this letter, the terms of the Plan shall control.  All
capitalized terms not defined herein shall have the meaning given to them in the
Plan.  Please refer to the Plan for certain conditions not set forth
in this letter. Copies of the Plan and the Company’s annual report to
shareholders on Form 10-K for fiscal year 20__ are available from the Company’s
corporate secretary at (804) 747-0422.

      


      
        	 
      	
                Number
      of Shares Subject to Option:

              	 
      	
                [_____]

              	 
      
	 
      	
                Option
      Price Per Share:

              	 
      	
                [$__.__]

              	 
      


      

      


      Vesting of
Options

      


      The
Options shall vest, and shall be exercisable, on the earliest of the following
dates:

      


      
        	
                1.  

              	
                Except
      as otherwise provide in this letter, the Options will vest and become
      exercisable according to the following schedule:  one-third on
      [______, 20__], one-third on [______, 20__],  and one-third on
      [______, 20__] provided you continue to serve as a Director of the Company
      on such dates.

              


      

      


      
        	
                2.  

              	
                The
      date of a Change of Control.

              


      

      


      The
Options may be exercised in whole or in part, from the dates described
immediately above until the Options terminate, as described below.

      


      Termination of
Options

      


      The
Options shall terminate under the following conditions:

      


      
        	
                1.  

              	
                Expiration.  The
      Option will expire on [_____________] (the “Expiration
    Date”).

              


      

      


      
        	
                2.  

              	
                Cessation
      of Service.  If your service as a Director of the Company ceases
      for any reason other than death or disability prior to your completion of
      five year (5) years of service as a Director, your unvested Options will
      terminate.  Your vested Options will be unaffected and remain
      subject to the terms of this
letter.

              


      


      
        
          
            1 of
3

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      Death, Disability or
Cessation of Services after Five Years Service

      


      If your
service as a Director terminates (i) because you die, (ii) because you become
disabled, or (iii) for any other reason after service as a Director for a period
of at least five (5) consecutive years and you are in good standing with the
Company, all of your Options covered by this letter will become immediately
vested and exercisable, effective as of the date of such termination, and you,
your personal representative, distributees, or legatees, as applicable, may
exercise your vested Options at any time before the Expiration
Date.

      


      Exercise of
Options

      


      When the
Options are exercisable, you may purchase shares of Company Common Stock under
your Option by:

      


      
        	
                1.  

              	
                Giving
      written notice to the Company, signed by you, stating the number of shares
      you have elected to purchase; and

              


      

      


      
        	
                2.  

              	
                Remitting
      payment of the exercise price in full in cash or by delivery of shares of
      Company Common Stock owned by you (valued at their Fair Market Value on
      the date of exercise) in satisfaction of all or any part of the exercise
      price; and

              


      

      


      
        	
                3.  

              	
                Remitting
      payment to satisfy the income tax withholding requirement for
      non-statutory options or making other arrangements to satisfy such
      withholding that are satisfactory to the Company and permitted by the
      Plan.

              


      

      


      Transferability of
Options

      


      Except as
provided below, the Options are not transferable by you other than by will or by
the laws of descent and distribution and is exercisable during your lifetime
only by you.  You may transfer your rights under the Option during
your lifetime subject to the following limitations:

      


      
        	
                1.  

              	
                Transfers
      are allowed only to the following
transferees:

              


      

      


      
        	
                a)  

              	
                Your
      spouse, children, step-children, grandchildren, step-grandchildren or
      other lineal descendants (including relationships arising from legal
      adoptions).  Such individuals are hereinafter referred to as
      “Immediate Family Members”.

              


      

      
        	
                b)  

              	
                Trust(s)
      for the exclusive benefit of any one or more of your Immediate Family
      Members.

              


      

      
        	
                c)  

              	
                Partnership(s),
      limited liability company(ies) or other entity(ies), the only partners,
      members or interest holder of which are among your Immediate Family
      Members.

              


      

      
        	
                d)  

              	
                Pursuant
      to a court issued divorce decree or Domestic Relations Order (as defined
      in the Code or Title I of the Employee Retirement Income Security Act (or
      rules thereunder)).

              


      

      


      
        	
                2.  

              	
                You
      may not receive any consideration in connection with the
      transfer.

              


      

      


      
        	
                3.  

              	
                Transferees
      may not subsequently transfer their rights under the Option except by will
      or by the laws of descent or
distribution.

              


      

      


      
        	
                4.  

              	
                Following
      the transfer, the Option will continue to be subject to the same terms and
      conditions as were applicable immediately prior to transfer (except that
      the transferee may deliver the Option exercise notice and payment of the
      exercise price).

              


      

      


      
        	
                5.  

              	
                You
      must give written notice of the transfer to the Company and the Company
      may require that any transfer is conditioned upon the transferee executing
      any document or agreement requested by the
  Company.

              


      


      
        
          
            2 of
3

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      Change in Capital
Structure

      


      If the
number of outstanding shares of the Company’s Common Stock is increased or
decreased as a result of a stock dividend, stock split, subdivision or
consolidation of shares, or other similar change in capitalization, the number
of Company shares for which you have unexercised Options and the exercise price
will automatically be adjusted, as provided in the Plan, (i) so as to preserve
the ratio that existed immediately before the change between the number of such
shares and the total number of shares of Company stock previously outstanding,
and (ii) so that your aggregate Option price remains the same; provided,
however, that the Company will not be required to issue any fractional shares
upon exercise of your Options as a result of such adjustment.

      


      Acceptance of
Option

      


      Please
indicate your acceptance of the terms and conditions pertaining to the Options
granted herein by signing your name in the space provided below and returning
one copy to the attention of [__________].  When signed by you, this
letter, together with the Plan, will become a Stock Option Agreement between you
and the Company which is governed by and construed and enforced in accordance
with the laws of the Commonwealth of Virginia.  This letter will not be effective as
a Stock Option Agreement unless it is signed and returned to ____________ at the
CarMax Home Office (12800 Tuckahoe Creek Parkway, Richmond, VA 23238), as soon
as possible, but in no event later than [_______, 20__].

      


      Acceptance
of this letter places no obligation or commitment on you to exercise the
Options.  By accepting this letter, you agree that if you have not
achieved the Company stock ownership levels as required by the Company’s
Corporate Governance Guidelines, if applicable, then upon exercise of any
Options you will retain at least 50% of the underlying shares remaining after
satisfaction of the option exercise cost and applicable tax
liability.

      


      Sincerely,

      


      


      


      Keith D.
Browning

      Executive
Vice President and Chief Financial Officer

      


      


      Accepted
this ______________ day of ___________________________, 200_

      


      


      


      ______________________________________________

      Signature

      


      ______________________________________________

      Printed
Name
3
of 3